The Nigeria Governors’ Forum (NGF) on Thursday rejected the proposed increase in Value Added Tax (VAT) and reduction in Corporate Income Tax (CIT), citing the need to maintain economic stability.
Investors King gathered that the governors after a meeting in Abuja on Thursday explained that the move is untimely.
The forum also expressed support for the ongoing legislative process of the Tax Reform Bills and advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard citizens’ welfare and promote agricultural productivity.
Investors King recalled that the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, disclosed that the committee was proposing a law to the National Assembly to increase VAT from the current 7.5% to 10%.
Oyedele stated “We have significant issues in our tax revenue. We have issues of revenue generally, which means tax and non-tax. You can describe the whole fiscal system as being in a state of crisis.
“When my committee was set up, we had three broad mandates. The first was to look at governance: our finances as a country, borrowing, and coordination within the federal government and across sub-national levels.
“The second was revenue transformation. The revenue profile of the country is abysmally low. If you dedicate our whole revenue to fixing roads, it will still be insufficient. The third mandate concerns government assets.
“The law we are proposing to the National Assembly includes increasing the VAT rate from 7.5% to 10% by 2025. We don’t know how soon they will be able to pass the law. Subsequent increases are also outlined in terms of when they will take effect.”
However, the governors, in a communiqué issued on Thursday, stated “We, members of the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee, convened on January 16, 2025, to deliberate on critical national issues, including the reform of Nigeria’s fiscal policies and tax system, and arrived at the following resolutions
“The forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws. Members acknowledged the importance of modernizing the tax system to enhance fiscal stability and align with global best practices.
“The forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50% based on equality, 30% based on derivation, and 20% based on population.
“Members agreed that there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time to maintain economic stability. The forum advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.
“The meeting recommended that there should be no terminal clause for TETFUND, NASENI, and NITDA in the sharing of development levies in the bills.
“The forum supports the continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills.”
